Inflation still a worry for the Eurozone

This Euro forecast will address the factors that are likely to affect exchange rates in the comings weeks if you are buying abroad or making a currency transfer. In the table below we have shown the difference in buying £200,000 at the high and low points on Friday.

Currency Pair

% Change

Difference on £200,000

GBP/EUR

0.859%

€1960

Inflation still stopping the ECB from cutting back on Quantitative Easing

Inflation has been a problem for the Eurozone for a considerable time. At one point it was bordering on deflation. Quantitative Easing (QE) is the process of pumping money into an economy in order to stimulate growth. There is currently €80bn being injected into the Eurozone each month.

Mario Draghi the head of the European Central Bank (ECB) is reluctant to decrease the stimulus despite calls from other members of the ECB. He seems justified, as inflation levels are dipping, now down to 1.4%, when last year it was up very close to the ECB target of 2%.

I am of the opinion the Euro could be in for a rough ride when you consider some of the Eurozone’s problems. We have the German election later in the year, where a far right party could gain power due to the growing concerns over immigration. This could potentially cause another referendum which could cause the euro to weaken substantially. Let us also not forget about Greek debt another problem that will not go away.

Today will see the release of services purchase managers index (PMI) data. Services PMI is an indicator of the economic situation in the euro zone services sector. It captures an overview of the condition of sales and employment. This can influence Euro levels.

On Wednesday, we will get the opportunity to see GDP figures. This is a key barometer as the health of the Eurozone and definitely has the potential to cause fluctuations on the exchange.

Thursday brings the ECB interest rate decision, but considering the current economic climate I would be very surprised to see any change. The ECB monetary policy statement could be of interest however as this gives an insight to monetary policy moving forward.

B. Kimber-Lane

P. Berryman

Exchange rates on this page are interbank rates and indicate where the market is trading to show the performance of a currency pair. They are not indicative of the rates which we offer. The information on this web site is provided free of charge for information purposes only. It does not constitute advice to any person on any matter. Foreign Currency Direct plc. ("FCD") makes every reasonable effort to ensure that this information is accurate and complete but assumes no responsibility for and gives no warranty with regard to the same.